Scott Rothstein: Ponzi Schemes, Morocco, & Golden Toilets
It seems like only yesterday that many thousands of people were being scammed by Ponzi schemers with elaborate stories and fake investment schemes. I guess that’s because it was yesterday, and every other day, except now it is mostly done with federal bailout money. Every now and then, though, somebody will get too greedy and must take the fall.
At the moment, that is Scott Rothstein. Rothstein is, or was, a lawyer who has been called, among other things, ”the Bernie Madoff of South Florida.” (Other Madoff-related nicknames apparently include “Mini-Madoff,” and “Madoff on Crack,” although those seem inconsistent to me.) His version of a Ponzi scheme was to bring investors into his law firm and tell them that he had clients who would assign the rights to settlement agreements that paid over time, in exchange for getting a lump-sum now. The investors would profit from the difference, later, assuming that they put up their money now. And they did. Put up their money, that is, to the tune of maybe $1.2 billion. They did not profit, because there were no settlement agreements, no clients, and no cases. But prior investors were paid with new investors’ money, the classic Ponzi arrangement.
Huge amounts of money were turned over, because there were absolutely no warning signs of any kind that Rothstein might be a crook. Who doesn’t know a lawyer who owns three Bentleys and up to 20 other luxury cars that he keeps in an air-conditioned warehouse? (At the moment I only have two Bentleys, but I have not been a partner that long.) Also, many’s the time that our staff has thanked me and our other partners for “shower[ing] gifts on all of them, including exotic cars, jewelry and boats.” It’s just the way lawyers operate. And I object especially to the suggestion that you should suspect a man of fraud just because he has gold-plated toilets.
The Gold-Plated Scott Rothstein Toilet
Okay, seriously — if your lawyer or investment manager has a gold-plated toilet, first, DO NOT GIVE THAT PERSON ANY MORE MONEY. THEY HAVE ENOUGH. And you should also officially be on notice at that point that further inquiry is suggested as to how that person came by gold-plated-toilet money to begin with. In my experience, people who made their money honestly do not plate their toilets with it.
Okay, in all fairness, it was just the toilet lids. But on the other hand, he had two of them:
When news of the Ponzi scheme broke, someone sent [Bob] Norman [a reporter covering the story] a photo of Rothstein’s his-and-hers toilets. The lids were gold-plated, each estimated to cost $25,000.
Norman said one of Rothstein’s investors told him: “I was lulled into believing this myth that he created. I really believed he had a golden touch. What better way to perpetuate that myth than by having a golden toilet?”
So, let me see if I understand. You thought the man’s golden toilet was evidence that he had the Midas touch? But you didn’t ask him to sit on anything else to prove it? And is it too late for me to ask you for money?
Rothstein pleaded guilty last month, probably in part because it is difficult to come up with an innocent explanation for why you “wired $16 million to an offshore account and fled to Morocco in a private jet” if you haven’t been up to something. He faces up to 100 years in jail, where the toilets are stainless steel. Although maybe putting his ass in jail will change that.
Why Morocco, and the followup question, why in the world did the guy come back? Good questions.
Not coincidentally, Morocco is one of the countries that has no extradition treaty with the United States, something that Rothstein knew because — and this is possibly my favorite detail of the whole story, short of the golden toilets – he made somebody in his firm research that issue for him. The project was supposedly on behalf of a “client,” but he was in fact having someone research the question of where he should flee to avoid prosecution.
I was sort of hoping he called in an associate and just made that person do it, but it turns out he sent an email, apparently to everyone in the firm (Rothstein, Rosenfeldt and Adler law firm in downtown Fort Lauderdale), saying he had a rush project for an important client. “We have a client that was a United States citizen until about 6 months ago,” Rothstein wrote in the email, probably able to resist making air quotes around “client” only because he was busy typing the word. “He became a citizen of Israel and renounced his United States citizenship. He is likely to be charged with a multitude of crimes in the United States including fraud, money laundering and embezzlement.” (I’m trying to imagine what people at the firm were thinking upon reading this.) Rothstein wanted them to research whether the client could be extradited from Israel, or could be prosecuted for the crimes in Israel. “This client is related to a very powerful client of ours,” Rothstein continued, “and so time is of the essence. Lets [sic] rock and roll….there is a very large fee attached to this case. Thanks Love ya Scott,” he concluded.
“Love ya”? When I was an associate, partners never said “love ya” when asking me to research countries to which they could flee without fear of extradition. Times sure have changed.
Suspicion by Attorneys at Rothstein, Rosenfeldt and Adler Law Firm
The report in which I found this information went on to say that “[a]ttorneys in the firm now believe ‘the client’ was actually Rothstein.” It did not say how long it took them to figure this out, but it does confirm that someone at the firm advised Rothstein that there might be a better choice:
Stuart Rosenfeldt [another named partner at the firm], who was in a 50 percent partnership with Rothstein at the time, said that he and many of the other attorneys in the firm now believe that Rothstein was talking about his own situation and that another attorney in the firm suggested that Morocco was one destination that did not have extradition agreements with either the U.S. or Israel.
Next stop, Morocco.
The report also quoted Rothstein’s lawyer as saying that as far as he knew, the e-mail really was about an actual client, and the trip to Morocco was just sort of a last-minute vacation. “I still don’t know [if there was a client],” he said. “I had nothing further to do with it . . . . He was always intending on coming back [from Morocco]. He came back early. He never intended to flee. He literally went there to clear his head.” Also, the fact that he had just been told Morocco did not have an extradition treaty was literally a coincidence.
I guess ultimately the answer [as to why he fled to Morocco specifically] depends on whether you believe it was a coincidence that not long before the fleeing started, he assigned somebody a research project involving countries that did not have extradition treaties with the United States. If you don’t believe that was a coincidence, the more difficult question is probably: Once safely in Morocco, why the hell did he come back? I don’t think there is a clear answer to this, either, but here are some possibilities.
First, it may not have been all that safe in sunny Morocco. This is hearsay, but one report suggested that “investors in Morocco” had given Rothstein $85 million, and assuming they now realize they are not getting that money back, he might have needed to extradite himself from Morocco on the double. But this report describes Rothstein as being “as happy as ever” during his time in Morocco. Hard to believe he was that way all the time, as his life collapsed, but he didn’t act hunted.
Second, as the Wall Street Journal noted, Rothstein’s partner Stuart Rosenfeldt has claimed that in an email from Morocco, Rothstein listed his options as suicide, life on the run or life in prison, and that Rosenfeldt urged him to “choose life.” Maybe so, but maybe he didn’t mean life in prison, the prospect of which might convince Rothstein to cut a deal.
Which is what he did, and that is not good for a lot of people. For example, recent bankruptcy filings allege that all three named partners engaged in “curious and circuitous movement of law firm funds over the past few years.” These included borrowing millions from the firm and then paying that money back to the firm, themselves, their wives, and various third parties. The filings also allege Rosenfeldt himself spent an awful lot of money — no golden toilets, apparently, but he did put $1 million on his firm-issued American Express card for charges including 72 pieces of jewelry for his wife, home furnishings, clothes, vacations, restaurant meals, and an undisclosed number of “exotic reptiles.” (Maybe this is why the expense reports I submit for my exotic reptiles keep getting rejected.)
Rosenfeldt’s attorney said these allegations would “prove to be overstatements.”
So, third, Rothstein may have a lot to chat about, and maybe having seen Morocco, he decided he might be able to cut a deal good enough to at least make prison reasonable in comparison to that hellhole. Under the plea bargain, prosecutors agreed to recommend a sentence reduction and more lenient prison conditions in exchange for cooperation. As a result, he is expected to get about 30 years rather than the 100 he faces. (Bernie Madoff did not cooperate, and got 150 years.) Still, 30 years is 30 years.
Fourth, Rothstein has maintained that he chose to come back, plead, and help authorities collect stolen assets, because he decided to “do the right thing.” I guess that is not impossible.
Finally, since I don’t really like any of the above explanations, I am going to go with this one: with him in jail, the feds wouldn’t feel obligated to go after his wife. As noted above, all the partners gave lavish gifts — and lots and lots of cash — to their wives, and it is hard to imagine that they did not at least suspect something. But the same was true of Ruth Madoff, who has also not been charged. I am guessing that so long as the primary fraudster is behind bars, prosecutors are probably satisfied.
I haven’t been able to find a better answer than that, so my guess is that Rothstein came back to the U.S. in order to make sure his wife stayed out of jail. And that’s nice, at least.
On the other hand, maybe he just really hates Moroccan food.
[thanks to alkan chaglar and kevin underhill via cc]
Law School Interview Tips: Advice and How to Answer Questions
How can I prepare for my interview?
You should do research on the school itself. Learn a little about the city it is in, the programs offered, grading policies, and instruction style. Look at the school’s information packet and their web site. If you’re interested in going into a particular field after law school, find out which faculty at the school are teaching in that area. The more you read about the school, the more questions you will have to ask your interviewer.
What should I wear to the interview?
Dress professionally in your style. This simply means to dress like you would if you were a lawyer, but do not lose all of your personality (i.e. if you are a guy with long hair, don’t cut it; if you normally have a mustache, leave it…you are not trying to produce a standard image, you want to be yourself).
Should I bring anything to the interview?
Bring a list of any questions you wish to ask (you will probably forget most of them if you try to memorize them). Always have a pen and paper on you. Find out what the weather will be like and bring a coat if necessary. Bring your application to look over between interviews.
What will I be asked?
This is largely dependent on the school and on the interviewer (in other words, on chance). Be prepared to answer questions about “defining” moments in your life–elaborating on what you do for fun, what your favorite activity is, what sports you play, and just about anything that interests you. Some schools still drill you though, so beware (these interviews can truly be draining). Stress interviews (empty rooms with phones ringing, being asked to open windows that are nailed shut) are very rare. If it’s on your application, be prepared to discuss it.
Some commonly asked law school interview questions:
- The favorite: Tell me about yourself.
- Where do you see yourself in 10 years? (often asked)
- What does your family think about this?
- What is the biggest problem facing the legal field today?
- What are the disadvantages/downsides of a career in law, beside no time?
- What are you looking for in a law school?
- What do you think about “insert current hot topic here”?
- What field of law are you interested in?
- What do you like to do that isn’t law related?
- What will you do if you do not get accepted somewhere this year?
- What are your strengths/weaknesses?
And, perhaps the most popular…
Why do you want to be a lawyer?
If you want to say “to help people,” please just make that an introduction to a much deeper soliloquy! You can tie this answer to personal experiences (i.e. things you may have seen while working/volunteering in the legal field, or possibly a personal experience that you or a family member went through). The key is to come across as someone who has genuinely thought through the decision.
What questions should I ask?
Ask anything you want about the school. Many times faculty or students may not know the answer, but will be willing to find out and get back to you.
Should I do anything after the interview?
Sending a thank you note is purely optional, and some consider it an outdated practice. Others feel that acknowledging time spent on your behalf is just common courtesy. One suggestion is to follow up with the admissions office, expressing your interest in the school.
What does “waitlisted” mean? What does “hold” mean?
The terms “wait list,” “acceptance range,” “hold,” and any others synonymous with these all mean that the class was full, but you have been placed on a ranked list. If spots open up, people on the wait list will be moved up and offered seats in the class. In general a school will accept twice as many people as its class size when all is said and done. Also, even though waitlists ARE ranked, they do not have to pull from them in order, so if something about you really stands out (such as a follow up letter stating how impressed you were with the school and how much you would like to become part of their institution), you can increase your chances of getting in off the wait list.
What if I don’t get accepted?
Try again. Trying 2 times seems to be the norm these days but after 3 times you might want to consider doing something else (there have been some people who have finally been accepted after applying 4+ times, but they are the exception rather than the norm). The most important thing to do is to consult each school as to why you were rejected or not taken off of the waitlist and ask what you can do to improve your chances. Follow their advice.
How should I choose what school to go to?
This depends on several factors. Important ones include location and what the school “typically” produces. In other words, if you want to specialize, it may not be in your best interest to go to a state school where most of the class goes into general practice. Financial issues are also a factor, as state-funded schools are often much less expensive than private schools. Going to a school with an established reputation may be of benefit, especially when applying for fellowships and positions in academic law. If you feel that you may end up in an academic position, or are considering a very competitive specialty, you may consider going to a “name” school. If you narrow it down to two schools which are virtually identical, go to the one that feels right–that might be your best choice. How do the students at the school feel? Are they treated well?
What should I do during the summer before law school?
Nothing at all. Take a deep breath.
[thanks to kafta4prez and sdnwiki via cc]
Gatorade v. Powerade: The Battle Over the Incomplete ESPN Magazine Advertisement
Coke’s POWERADE brand sports drink was contemplating how to take market share from segment leader Pepsi’s GATORADE product. It decided to tout the addition of calcium, magnesium and potassium. It ran a campaign describing these minerals as ‘critical’, describing POWERADE as ‘complete,’ describing GATORADE as ‘incomplete’ alongside a depiction of half a GATORADE bottle (pictured is the cover of ESPN magazine containing a fold-out ad – the cover says ‘you wouldn’t settle for an incomplete cover’ and then folding out to contain the POWERADE ‘incomplete’ ad).
Interestingly, Pepsi had intended to pursue a similar strategy, but ran into a problem sourcing sufficient calcium. It then removed references on its website to calcium as being beneficial. (Ed Note: I would be interested if anyone has scoop on why the worldwide calcium shortage affected Pepsi but not Coke).
So Pepsi sues in the ‘complete vs incomplete’ claims, the ‘critical’ claims, use of the slogan ‘UPGRADE YOUR FORMULA, UPGRADE YOUR GAME,’ and the half a bottle depiction.
The campaign began in late March, Pepsi sued on April 13, Coke pulled some of the ads in late May (after the campaign ran its intended 60 days). Pulling the ads mooted some of the claims, including the half a bottle one, which is too bad from my point of view, because I’m interested in post-Federal Dilution Act analyses of ’scared john deere’ type claims.
The SDNY rejects’ Pepsi’s motion for preliminary injunction on straight-forward grounds. “Complete’ and ‘critical’ are the sort of vague types of puffery that we expose ourselves too all the time. The Court notkes that Coke was sophomoric and boorish, but not deceptive. As for ‘UPGRADE YORU GAME;’ the Court notes:
No reasonable consumer, having read the slogan, would be justified in believing that it would actually result in improved athletic abilities such as playing a better game of basketball.
Ha! Take a look at who Pepsi and Coke pay to endorse the product. Look at the ads. Spend time with thirteen year old boys. These products thrive on unreasonable consumers relying on unjustified beliefs.
Stokely-Van Camp, Inc. v. The Coca-Cola Co., 2009 WL 2390245 (S.D.N.Y.)
In the district court’s words, Powerade “advertises its beverage by promoting its inclusion of certain electrolytes contained in sweat, and its competitor [Gatorade] wants it to stop.” In March, Coca-Cola relaunched Powerade as Powerade ION4, which is allegedly more like human sweat than both old Powerade and Gatorade (comment: ewww), in particular because ION4 has small quantities of calcium and magnesium; small quantities of calcium and magnesium are lost in sweat.
Gatorade sued Coca-Cola for false advertising, trademark dilution, and related torts.
The court found that sports drinks, as a category, have several components. First, they have electrolytes or salts, the most important of which is sodium “which stimulates rapid absorption of liquid by the body, helps the body retain fluid, and also stimulates the thirst response to encourage drinking.” They often contain potassium, which aids in hydration. And they contain carbohydrates, usually glucose, to provide energy, facilitate the absorption of liquid, and make the drink taste better. Gatorade is the market leader, with 75-80% share. Powerade, a me-too brand, has most of the remainder.
To improve market share, Coca-Cola decided to harp on the “sweat replacement” idea, pioneered by Gatorade. It relied on current scientific research about the amounts of sodium, potassium, calcium, and magnesium lost in sweat, calculating a ratio of 100 parts sodium to 24 parts potassium to 3 parts calcium to 1 part magnesium. It wasn’t feasible to make a true sweat-like formultion, because that would mean 800 mg of salt per 8-oz serving, “incredibly salty and kind of unpalatable.” (Comment: kind of? You think?) So they instead put in 100 mg sodium and an appropriate ratio of the other electrolytes, and adopted the name/tagline “Powerade ION4–Advanced Electrolyte System.”
Until recently, Gatorade touted the presence of calcium and magnesium in one of its variants, Gatorade Endurance Formula, attributing performance and hydration benefits to these ingredients. Studies didn’t show any positive effects on hydration, but its scientists were still optimistic about the possibilities. Gatorade scientists even filed a patent application for a sports drink enhanced with calcium and magnesium, claiming to improve fluid consumption and retention over conventional sports drinks. Gatorade made some claims to consumers, especially athletic coaches and trainers, about the functional benefits of calcium and magnesium, stating that its special formula was designed to more effectively replace electrolytes lost in sweat. Up through April 2009, just before Gatorade sued, the Gatorade website advertised that the calcium and magnesium in Gatorade Endurance Formula provide a performance benefit.
Gatorade caught wind of the Powerade ION4 plan, and initially wanted to “erase the point of difference” by reformulating Gatorade before ION4 launched. It experienced a calcium supply roadblock, however, and scrapped the reformulation because it couldn’t launch the new version before ION4 debuted. Then, on advice of counsel, it started to purge its ads of positive references to calcium and magnesium. It issued new talking points approved by the legal departement, telling spokespeople to say that calcium and magnesium are not important in a sports drink—only tiny amounts of these minerals are lost through sweat, and the tinier amounts in ION4 (remember that the ratio is the same, not the content) provide no material benefit. These new talking points left some employees “bewildered” about the apparent contradiction with past messages.
Meanwhile ION4 began advertising, first with a comparative campaign because Gatorade is the market leader and thus growing the brand would require comparison to Gatorade. The comparative ads were designed to last 60 days “so as not to give prolonged free publicity” to Gatorade and because retailers “don’t like it when brands within a category just compete at one another.” The ads included the cover of the April 6, 2009 issue of ESPN magazine. The front has half a picture and the line “you wouldn’t settle for an incomplete cover” with a flap that unfolds, suggesting that Gatorade is “incomplete” and “missing two electrolytes.”
ION4 called itself “the complete sports drink,” containing four electrolytes “in the same ratio typically lost in sweat …. Upgrade your formula. Upgrade your game.” Other versions of the ad said Gatorade was “missing two critical electrolytes.” Billboards repeated the “incomplete” theme, as did the Powerade website.
The comparative ads were discontinued within the planned 60-day period; according to Coca-Cola, some ads in ESPN publications were discontinued earlier because Gatorade threatened ESPN with the loss of millions of dollars in ad spend. (The opinion has a tone suggesting the parties are both throwing tantrums; kind of funny how the same behavior—both in the marketplace and in the courtroom—can be spun as extreme rationality in the Holmesian ‘bad man’ sense or as childishness, depending on your viewpoint. Maybe the bad man is actually an undersocialized child?)
Coca-Cola also dropped the term “critical” from its ads, and has no intent to resume the “incomplete” or “missing two electrolytes” claims while this suit is pending. But it’s still making the “complete” claims, including a claim that “other sports drinks don’t” replenish these four electrolytes “in the same ratio typically lost in sweat.” Meanwhile, the Nutrition Facts box on the label said ION4 is “[n]ot a significant source of … calcium ….” The revised copy says that the drink “helps replenish 4 electrolytes lost in sweat,” and the Nutrition Facts says, “Not a significant source of … calcium [and] magnesium ….”
So: Gatorade alleged that the complete/incomplete/missing/critical etc. claims were false, and challenged the use of “upgrade your formula. Upgrade your game.” It also alleged dilution by tarnishment from the ads showing half a bottle of Gatorade and using the “incomplete” claim. (The federal claim is clearly barred due to the comparative advertising exception to 43(c); if litigated to conclusion, raises an interesting question of the extent to which NY’s dilution law, which has extensive built-up precedent, ought nonetheless be interpreted to match the federal law.)
The court found the request for a preliminary injunction against the incomplete/missing claims, and the allegedly dilutive uses of the half-bottle of Gatorade, moot in light of Coca-Cola’s sworn commitment not to resume the ads during the pendency of this suit. (Hmm. Given that Lanham Act cases are almost always resolved on such motions, that’s not a very strong commitment; I’m pretty sure it was open to the judge to find that a voluntary commitment was insufficient.)
On the remaining claims, the judge found that Gatorade failed to show falsity. First, on “The Complete Sports Drink” slogan, Gatorade conceded that ION4 was a complete sports drink, just not the only one. But the addition of “the” to “complete sports drink” was, the court ruled, non-actionable puffery: “consumers understand that the advertiser is not contending that the particular attribute or feature can only be found in its product.” Furthermore, “advertising terms” like “complete” are puffery becaues they’re subjective and nonfalsifiable. Gatorade’s expert admitted there’s no scientific consensus on the meaning of “complete” in the sports drink context.
Gatorade argued that the previous Powerade ads primed consumers to make the complete/incomplete comparative connection, even though the original comparative ads had ceased to run. But this isn’t the only reasonable interpretation of the ads, and so Gatorade couldn’t show that the claim was false by necessary implication.
Moreover, there was no evidence that any comparison to Gatorade was false: the parties agreed that Gatorade doesn’t have Calcium and magnesium. “But Coca-Cola does not claim in its advertising for Powerade ION4 that either calcium or magnesium provides any benefit other than the fact that they are added, for whatever that is worth.” “Pointing out” a true but meaningless fact can’t be literally false. (Oh, come on. A necessary implication of an ad focusing on the addition of those ingredients is that they’re important. Add to that the fact that calcium and magnesium are known to be essential nutrients, and we’re a far cry from an ad touting a meaningless made-up term that would confuse but not mislead consumers.) Anyway, Gatorade would have to show misleadingness to win, and it didn’t have a survey.
Gatorade tried to avoid the need for a survey by arguing that Coca-Cola’s bad intent to deceive warranted a presumption of deception, as Second Circuit precedent allows. The court found that the evidence here was insufficient to rise to the requisite level of egregiousness. Coca-Cola’s internal documents have “locker room type banter” and “other boorish comments” directed at Gatorade, meant to “fire the guys up.” But they don’t show an intent to deceive; the worst fact was a company scientist’s expression of concern that the use of “incomplete” might lead consumers to think, wrongly, that Gatorade wasn’t as functional as Powerade. And the court accepted the explanation that company executives ultimately concluded the ads were truthful given their meaning: Gatorade doesn’t have calcium and magnesium.
As for “Replenishes 4 critical electrolytes in the same ratio typically lost in sweat.
Other sports drinks don’t,” this was literally true in the sense of being based on research on the average amounts lost in sweat. Gatorade argued that sweat loss varies from person to person, and even in a single individual. But the ads don’t claim that the ratio is the same for everyone, just that it’s the “typical” ratio. In lay speech, “average,” “typically,” and “usually” are often synonymous. This was another meaningless but not literally false statement.
Gatorade argued that “4 critical electrolytes” was false because calcium and magnesium aren’t critical to sports drink functionality. But the ad doesn’t say that calcium and magnesium are “critical” to hydration or to sports drinks, just that they’re critical, “for whatever that is worth.” It’s true that they’re vital to the human body. (Here again, I think the court is mistaking the function of the falsity by necessary implication doctrine, which is designed to fill in the easy logical/Gricean gaps that ads regularly use to get us to draw advertiser-favorable conclusions. The only reason to call the minerals “critical” is to suggest that one’s sports drink ought to contain them.)
“Upgrade your formula. Upgrade your game,” was also not literally false or false by necessary implication. The slogan isn’t comparative on its face (what?), and it could mean an upgrade from the previous formulation of Powerade. Even if Coca-Cola intended only a comparison to Gatorade, the text is still ambiguous. And it’s also literally true, even if both drinks provide hydration and performance benefits, because one plausible interpretation is that the slogan is meaningless rhetoric, “exhorting consumers to ‘upgrade your game.’” (Yes, and “Eat this. Be healthy” is just an exhortation too, I’m sure.) Anyway, it’s too vague and nonspecific to be a comparison. It’s also puffery—no reasonable consumer would be justified in believing that the drink would actually result in improved athletic abilities. (This is inconsistent with my experience, which is that lots of people believe this type of claim, maybe because they want to; my trainer was just telling me that her performance improved when she drank a certain type of energy drink.) And it’s puffery in that any implied superiority claim would be vague and nonspecific.
Without likely success on the merits, Gatorade couldn’t show irreparable harm; it couldn’t get a presumption of irreparable harm anyway because it failed to show that the current ads make comparative claims. (In a duopoly, as this market is, I doubt that explicit comparativeness makes a difference.)
The court also rejected Gatorade’s argument that the ads created a danger to public health by touting Powerade’s calcium content as “complete” even though Powerade does not have nutritionally significant amounts of calcium, creating the risk that people—especially at-risk female athletes concerned about calcium intake–will use Powerade as a calcium supplement. The court found this argument frivolous, because the label clearly states that Powerade isn’t a significant source of calcium, and any concerned consumer can simply read the label. (Compare to the recent 9th Circuit opinion on misleading product names arguably corrected by product labels.) “It would be remarkable indeed if a consumer were sufficiently concerned about obtaining the necessary daily requirement of calcium that he or she would drink a sports drink to obtain it, and yet so unconcerned that he or she would not even read the label that says the sports drink is not a significant source of calcium.”
Given Gatorade’s resources, its failure to show evidence of lost goodwill or lower sales was “striking,” and not in its favor.
Finally, Coca-Cola argued that Gatorade’s unclean hands disentitled it to a preliminary injunction, given that it had touted the importance of calcium and magnesium in sports drinks for years. Indeed, the court found, Gatorade had occasionally gone further than Coca-Cola in claiming performance or hydration benefits. In a similar case, Haagen-Dazs alleged that Frusen Gladje deceived consumers into thinking its ice cream was Swedish, when it was produced in the US—but so was Haagen-Dazs, and so the court concluded that it wasn’t entitled to equitable relief. Haagen-Dazs v. Frusen Gladje, 493 F. Supp. 73 (S.D.N.Y.1980). Gatorade, “having jumped on the bandwagon of calcium and magnesium first, [cannot] now jump off and claim that Coca-Cola must get off too.” Generally, wisdom may come better late than never, but a court of equity won’t help you if you decide that someone else is doing a better job of fooling consumers than you did.
[thanks to martin schwimmer and rebecca tushnet via cc]
